Burdick v. Horner Townsend & Kent, Inc. , 778 Utah Adv. Rep. 15 ( 2015 )

This opinion is subject to revision before
publication in the Pacific Reporter
2015 UT 8
IN THE
SUPREME COURT OF THE STATE OF UTAH
J. FRANK BURDICK; JIMMY V. HENRIE; GRANT B. HOWELL;
ELLA DEAN HUNTER; TERRY L. JORDAN; RICHARD MANUS;
TERESA MANUS; MICHAEL MARQUEZ; TERI MARQUEZ;
LURENE SWINBURNE, personal representative,
for and on behalf of the estate of
ROBERT D. SWINBURNE; and WYLMA TEMPLES,
Appellants,
v.
HORNER TOWNSEND & KENT, INC.;
JEFFREY C. CAMPBELL; FIVE STAR FINANCIAL GROUP,
Appellees.
No. 20110479
Filed January 23, 2015
Seventh Juvenile, Price Dep‘t
The Honorable Douglas B. Thomas
No. 060700588
Attorneys:
Fred R. Silvester, Spencer C. Siebers, Salt Lake City,
for appellants
John P. Harrington, Sherilyn A. Olsen, Salt Lake City,
for appellees
ASSOCIATE CHIEF JUSTICE NEHRING authored the opinion
of the Court, in which CHIEF JUSTICE DURRANT, JUSTICE DURHAM,
JUSTICE PARRISH, and JUSTICE LEE joined.
ASSOCIATE CHIEF JUSTICE NEHRING, opinion of the Court:
INTRODUCTION
¶1 Disappointed investors filed suit against their
investment agent, Jeffrey Campbell, and his former employer,
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Opinion of the Court
Hornor, Townsend & Kent, Inc. (HTK), alleging that
Mr. Campbell and HTK were liable for losses sustained in an
investment scam. Mr. Campbell pleaded guilty to the sale of
unregistered securities related to the investment scam and was
ordered to pay restitution. The district court granted summary
judgment in favor of HTK on plaintiffs‘ claims of securities
violations, negligent misrepresentation, and negligent training
and supervision. The district court also granted summary
judgment in favor of HTK regarding a release signed by one
investor. Plaintiffs appeal the grant of summary judgment on the
above issues. The district court also denied plaintiffs‘ motion for
reconsideration where they raised claims for negligence, control-
person liability, and material aid. Additionally, plaintiffs appeal
the rejection of reasonable attorney fees with respect to the
resolution of the claims against Mr. Campbell. We affirm in part
and reverse and remand in part.
BACKGROUND
I. FACTUAL BACKGROUND
¶2 HTK is a broker-dealer licensed to sell securities in the
state of Utah. HTK licenses registered representatives to sell
securities and other investment products. In July 2001,
Mr. Campbell became a registered representative of HTK. Before
becoming a registered representative of HTK, Mr. Campbell
created a ―doing business as‖ entity named Five Star Financial
Group (FSFG), which, according to Mr. Campbell, was for
marketing purposes. Mr. Campbell intended FSFG to allow him
to change his broker-dealer affiliation without having to change
his business name in order to maintain name recognition. FSFG
never became a separate legal entity, but was a marketing name
for Mr. Campbell. FSFG maintained an office at 70 W. Main
Street, Price, Utah. In addition to Mr. Campbell, FSFG consisted
of Frank Wheeler, Mary Alger, and Fred Davis. Mr. Davis,
Mr. Wheeler, and Ms. Alger were also registered representatives
of HTK.
¶3 In mid-2002, Mr. Campbell was approached by Michael
Fitzgerald about selling investments in Beverly Hills
Development Corporation (BHDC). BHDC sold investments in
the form of promissory notes, supposedly backed by real estate,
which would be developed and sold to repay investors at a rate of
return of 12 percent per annum. Mr. Campbell inquired whether
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the BHDC notes were securities, to which Mr. Fitzgerald
responded that the promissory notes were not securities.
Following his meetings with Mr. Fitzgerald, Mr. Campbell called
his supervisors at HTK, informed them he was investigating the
possibility of selling BHDC notes, and inquired how that would
affect his current relationship with HTK. Mr. Campbell met with
one of his supervisors, Monty Andrus, in person. Mr. Andrus
was a registered principal of HTK operating under the name
Cambridge Financial whose primary responsibilities included
hiring agents after initial approval by HTK, conducting yearly
compliance interviews and site visits, and supervising registered
agents within his region. Mr. Andrus‘s region included FSFG and
its registered agents. At their meeting, Mr. Campbell informed
Mr. Andrus that he was surrendering his securities license in
order to sell BHDC notes and that the surrender was to avoid ―a
possible conflict with the sale of [BHDC] promissory notes.‖
Mr. Campbell submitted a resignation letter on October 17, 2002,
requesting inactivation of his securities license, while maintaining
his ability to sell insurance investments through Penn Mutual Life
Insurance (Penn Mutual). Mr. Campbell then began selling
BHDC notes and was paid $10,000 per month.
¶4 Mr. Campbell sold BHDC notes from his office at FSFG.
Mr. Campbell informed the other agents in his office that he had
inactivated his securities license in order to sell BHDC notes.
Around the time Mr. Campbell inactivated his license,
Mr. Andrus told Mr. Wheeler, Ms. Alger, and Mr. Davis they
should distance themselves from Mr. Campbell and ―cut a clear
line so that clients would not perceive that [they] were involved‖
in the sale of BHDC notes. Neither Mr. Andrus nor Terry Boulter,
the compliance officer working with Mr. Andrus at Cambridge
Financial, detailed any other specific steps for the remaining HTK
registered representatives to take in separating themselves from
Mr. Campbell. The other agents attempted to distance themselves
by refraining from endorsing BHDC notes in any way or meeting
clients together with Mr. Campbell. The remaining HTK agents
continued to operate out of the same office building as
Mr. Campbell and continued to use the FSFG name through 2003.
There was no change in the office configuration, phone or fax
numbers, or office signage following the termination of
Mr. Campbell‘s relationship with HTK. Mr. Campbell continued
to share computer systems, including access to all customer data,
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with the other agents in the FSFG office, all of whom were
registered representatives of HTK. Ms. Alger continued to use the
same shared computer system to prepare paperwork and
maintain customer files for Mr. Campbell. At some point in 2003,
Mr. Wheeler, Ms. Alger, and Mr. Davis discontinued operating
under the FSFG name and began using the Cambridge Financial
name.
¶5 From October 2002 to September 2003, Mr. Campbell
solicited investments from and sold BHDC notes to plaintiffs.
Plaintiffs began their investing relationships with Mr. Campbell at
different times. Before his affiliation with HTK, Mr. Campbell
had been affiliated with another broker-dealer, and during that
time sold various investment products to plaintiffs Jimmie Henrie,
Robert Swinburne, and Ella Dean Hunter. Mr. Henrie,
Mr. Swinburne, and Ms. Hunter did not purchase any
HTK-approved investment products from Mr. Campbell while he
was affiliated with HTK as a registered representative. During his
time as an HTK registered representative, Mr. Campbell sold
various HTK-approved investment products to plaintiffs Frank
Burdick, Wylma Temples, and Richard and Teresa Manus. The
remaining plaintiffs—Terry Jordan, Loralyn Thayn, and Michael
and Teri Marquez—began their investment relationship with
Mr. Campbell only after his resignation from HTK, and they
purchased only BHDC notes from Mr. Campbell.
¶6 Plaintiffs received monthly statements from BHDC,
listing the Price, Utah, address of FSFG through January 2004. In
February 2004, the BHDC monthly statements began listing the
name Michael Fitzgerald and a different address in Alpine, Utah.
In March, payments began to slow, and plaintiffs became worried
about their investments. On April 1, 2004, Mr. Campbell met with
the plaintiffs and informed them that Mr. Fitzgerald‘s brother,
also involved in the BHDC notes, had left the country with their
money, which precipitated the litigation in this case.
II. PROCEDURAL BACKGROUND
¶7 Plaintiffs originally filed suit against HTK, FSFG,
Mr. Campbell, and Mr. Wheeler on March 3, 2006. HTK filed a
timely answer to plaintiffs‘ complaint and a cross-claim against
Mr. Campbell and Mr. Wheeler, alleging deceptive trade
practices, breach of contract against Mr. Wheeler, and
indemnification against Mr. Wheeler. Following several rounds
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of discovery, plaintiffs were granted leave to file a Third
Amended Complaint. In the Third Amended Complaint,
plaintiffs alleged four securities violations, fraud, fraudulent
concealment, negligent misrepresentation, breach of fiduciary
duty, civil conspiracy, and negligent training and supervision.
The four securities violations alleged were for material
misrepresentations and omissions, the sale of unregistered
securities, the sale of unsuitable securities, and the sale of
securities by an unlicensed broker-dealer. HTK filed a timely
answer to the Third Amended Complaint. During discovery,
plaintiffs stipulated to and the court ordered dismissal of the
claims for civil conspiracy, fraud, fraudulent concealment, breach
of fiduciary duty, and the sale of securities by an unlicensed agent
or broker-dealer. While discovery was continuing on plaintiffs‘
claims, Mr. Campbell pleaded no contest to one count of selling
unregistered securities, was granted a plea in abeyance, and was
ordered to pay restitution.
¶8 Following additional discovery, the district court
granted HTK‘s motion for summary judgment against plaintiff
Grant Howell on January 11, 2008, based on a release (Release)
between Mr. Howell and Penn Mutual Life Insurance, the parent
company of HTK. The district court granted summary judgment
after ruling the Release was clear and unambiguous. Additional
discovery was allowed to determine if the Release was procured
by fraud or mistake. Mr. Howell filed a Motion to Set Aside
Summary Judgment, which was denied, and the district court
granted HTK‘s Second Motion for Summary Judgment after
deciding that the Release was not procured by fraud or mistake.
¶9 Mr. Wheeler sought summary judgment against all
plaintiffs. Plaintiffs did not oppose Mr. Wheeler‘s motion for
summary judgment; thus, the district court entered summary
judgment in favor of Mr. Wheeler and dismissed plaintiffs‘ claims
against him with prejudice.
¶ 10 In April 2009, HTK sought summary judgment against
the remaining plaintiffs.1 In June 2009, the district court entered
1The remaining plaintiffs consisted of Ms. Hunter, Mr. Henrie,
Mr. Burdick, the Manuses, Mr. Jordan, the Marquezes,
Ms. Temples, Mr. Swinburne, and Ms. Thayn.
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summary judgment for HTK against the remaining plaintiffs.
The district court concluded that plaintiffs failed to produce
sufficient evidence to create a genuine issue of material fact as to
whether Mr. Campbell acted with the apparent authority of HTK
when he sold the BHDC notes. The district court divided
plaintiffs into two categories. Category One Plaintiffs were those
plaintiffs who purchased HTK-approved products through
Mr. Campbell while he was a registered representative of HTK.
Category One Plaintiffs consisted of Mr. Burdick, Ms. Temples,
and the Manuses. The district court concluded that Category One
Plaintiffs could not establish the third element of apparent
authority—that they relied on the involvement of HTK when they
invested in BHDC. Category Two Plaintiffs were plaintiffs who
purchased products from Mr. Campbell while he was not a
registered representative of HTK. Category Two Plaintiffs
consisted of Mr. Henrie, Ms. Hunter, Mr. Jordan, Mr. Swinburne,
Ms. Thayn,2 and the Marquezes. The district court concluded that
Category Two Plaintiffs could not establish any of the elements of
apparent authority. The district court also ruled that plaintiffs‘
claim for failure to supervise or negligent supervision failed as a
matter of law, in that HTK did not have a duty to supervise
Mr. Campbell. Finally, the district court concluded that HTK
properly pleaded the statute of limitations as an affirmative
defense against the state security violations claims. In reviewing
the statute of limitations defense, the district court found that the
undisputed material facts of the case established that the
Marquezes failed to file their state security claims within the two-
year statute of limitations.
¶ 11 Following the grant of summary judgment in favor of
HTK, plaintiffs pursued their claim against Mr. Campbell and his
dba FSFG, alleging that he sold unregistered securities in a
reckless manner. This claim was tried to a jury in September
2010. The jury found that Mr. Campbell had sold BHDC notes
recklessly and a judgment was entered against Mr. Campbell
individually with damages awarded for the amounts invested,
with 12 percent interest, and attorney fees, all of which were
2 Ms. Thayn did not appeal in this case.
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initially trebled under Utah Code section 61-1-22(2).3 Following
the trebling of this amount, other allowable damages under the
statute were added to the total and the amounts Mr. Campbell
had already repaid to investors were subtracted.
¶ 12 After the jury trial concluded, the district court
reviewed the grant of summary judgment in favor of HTK against
the Marquezes based on statute of limitation grounds. The
district court noted that since the grant of summary judgment, the
United States Supreme Court had decided Merck & Co. v.
Reynolds, addressing issues of the statute of limitations regarding
securities claims.4 The district court had not yet entered the final
order in the case and was concerned that the Merck & Co. opinion
could impact the grant of summary judgment against the
Marquezes. The court asked the parties to brief the issue.
¶ 13 Rather than addressing only the statute of limitations
claims regarding the Marquezes, plaintiffs filed a Motion for
Entry of Judgment and a Motion for Reconsideration on
November 9, 2010, seeking a review of all claims previously
granted summary judgment and raising new claims for the first
time. HTK objected to the Motion for Entry of Judgment and
Proposed Judgment, objected to the Motion for Reconsideration,
and filed a Motion to Strike the declarations and certain appendix
exhibits submitted with the Motion for Reconsideration and
accompanying Memorandum. Plaintiffs filed appropriate replies,
including a Declaration in Support of Attorneys‘ Fees and a
Memorandum in Opposition of HTK‘s Motion to Strike.
¶ 14 The district court first addressed plaintiffs‘ Motion for
Entry of a Final Judgment. The district court dismissed plaintiffs‘
claims against HTK on summary judgment and denied the motion
to set aside summary judgment with regard to Mr. Howell. First,
the district court found that attorney fees were limited to the
3 The trebling of damages was later amended to include only
the consideration paid for the security.
4 559 U.S. 633 (2010).
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prosecution of claims against Mr. Campbell5 and not HTK, and
that the Affidavit of Attorneys‘ Fees lacked sufficient detail and
failed to segregate the work performed with respect to claims
against Mr. Campbell as opposed to HTK, making it ―impossible‖
to permit a determination of reasonable attorney fees. The district
court determined the one-third contingency fee agreement
between plaintiffs and their counsel was insufficient to establish
reasonable attorney fees and thus denied attorney fees as part of
the proposed judgment. Second, the district court determined
that trebling of damages was permitted under Utah Code section
61-1-22(2). However, the district court determined the only
amount to be trebled was the consideration paid for the BHDC
notes, with interest and fees added, and funds already received
subtracted. The district court granted damages based on that
calculation.
¶ 15 The district court also addressed HTK‘s Motion to
Strike. The district court found that the declarations of plaintiffs,
a data summary from the Central Registration Depository (CRD)
pertaining to Mr. Campbell, a notice (Notice 01-79D) from the
National Association of Securities Dealers (NASD), and the
Financial Industry Regulatory Authority (FINRA) arbitration
resolutions were all available at the time of the summary
judgment proceedings for presentation to the court. The district
court found no cognizable justification for why the attachments
were not submitted prior to the grant of summary judgment to
HTK. Therefore, the court granted HTK‘s Motion to Strike the
attachments from the record.
¶ 16 Finally, the district court addressed plaintiffs‘ Motion
for Reconsideration. After briefing and argument on the impact
of Merck & Co., the district court reconsidered its Order and
modified it to read that there were genuine issues of material fact
regarding the statute of limitations with regard to the Marquezes‘
claims. The district court reviewed plaintiffs‘ claims that HTK
was liable, as a principal, for Mr. Campbell‘s actions under an
agency theory on the basis of apparent authority. The district
5 Claims against FSFG were pursued with the individual
claims against Mr. Campbell because FSFG was merely a dba of
Mr. Campbell and never became a separate legal entity.
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court reaffirmed its legal and factual findings regarding apparent
authority, and accordingly denied the plaintiffs‘ Motion for
Reconsideration on the claims based on principal–agent liability.
The district court next ruled that plaintiffs‘ evidence representing
HTK as a control person for statutory liability was stricken as
untimely and was not considered; thus, there was no new
evidence to view and the district court denied plaintiffs‘ Motion
for Reconsideration with respect to control-person liability
theory. The district court then reviewed the claim that HTK was
liable for materially aiding Mr. Campbell in the sale of
unregistered securities. The court reaffirmed its findings and
conclusions and denied the Motion for Reconsideration
regarding HTK‘s involvement in the material aid in the sale of
unregistered securities. The district court also reaffirmed its
findings and conclusions regarding whether HTK acted
negligently and denied the Motion for Reconsideration on the
issue of whether HTK acted negligently. Plaintiffs timely
appealed. We have jurisdiction under Utah Code section 78A-3-
102(3)(j).
STANDARDS OF REVIEW
¶ 17 Plaintiffs contend that the district court erred when it
granted summary judgment in favor of HTK on the issues of
apparent authority, negligence, material aid, control-person
liability, and Mr. Howell‘s release. ―We review the district
court‘s decision to grant summary judgment for correctness,
granting no deference to the district court.‖6
¶ 18 Plaintiffs also appeal the district court‘s rejection of
plaintiffs‘ request for attorney fees. ―[T]he district court has
broad discretion in determining what constitutes a reasonable
fee, and we will consider that determination against an abuse-of-
discretion standard.‖7
6 Commercial Real Estate Inv. v. Comcast of Utah II, Inc., 2012 UT
49, ¶ 14, 285 P.3d 1193 (internal quotation marks omitted).
7 Softsolutions, Inc. v. Brigham Young Univ., 2000 UT 46, ¶ 12,
1 P.3d 1095 (internal quotation marks omitted).
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ANALYSIS
¶ 19 Plaintiffs bring six issues on appeal. First, plaintiffs
argue the district court erred when it determined there were no
genuine issues of material fact to support claims for securities
violations and negligent misrepresentation based on agency
liability under a theory of apparent authority. Second, plaintiffs
argue that the district court erred when it granted summary
judgment for HTK on plaintiffs‘ negligence claim. Third,
plaintiffs argue that the district court erred when it struck
evidence and refused to consider plaintiffs‘ claim premised on the
theory of control-person liability. Fourth, plaintiffs argue that the
district court erred when it granted summary judgment for HTK
on the theory that HTK materially aided in the sale of
unregistered securities. Fifth, plaintiffs argue that the district
court erred when it ruled the Release between Grant Howell and
Penn Mutual was clear and unambiguous in releasing all claims
against HTK. Finally, plaintiffs argue the district court abused its
discretion when it rejected the contingent attorney fees without an
appropriate evaluation of the contingent fee agreement. We
address each claim in turn.
I. THE DISTRICT COURT DID NOT ERR
WHEN IT GRANTED SUMMARY JUDGMENT
ON PLAINTIFFS‘ SECURITIES AND NEGLIGENT
MISREPRESENTATION CLAIMS
¶ 20 Plaintiffs allege that HTK violated various state security
laws and negligently misrepresented securities in connection with
the sale of the BHDC notes. Plaintiffs‘ theory behind HTK‘s
liability is that Mr. Campbell was acting as an agent of HTK, on
the basis of apparent authority, when he sold the BHDC notes.8
The district court granted summary judgment for HTK on these
claims, finding that there were no genuine issues of material fact
and that no plaintiff could establish the elements required to
prove HTK had cloaked Mr. Campbell with apparent authority.
Plaintiffs Mr. Burdick, Ms. Temples, Ms. Hunter, Mr. Jordan, and
the Marquezes appeal the district court‘s ruling, arguing there
8 The parties have stipulated that Mr. Campbell did not act
with actual authority when he sold the BHDC notes.
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was sufficient evidence on the record to overcome summary
judgment.9
¶ 21 We begin by noting that due to the agent-brokerage
licensing structure for the sale of securities, agency liability on the
basis of apparent authority is no stranger to securities law.10
Indeed, a licensed securities agent, like any agent, may
simultaneously be cloaked with both actual and apparent
authority, the distinction being that the former relates to a
principal‘s manifestations to the agent, and the latter relates to a
principal‘s manifestations to a third party.11 ―Apparent authority
is the power held by an agent . . . to affect a principal‘s legal
relations with third parties when a third party reasonably believes
the actor has authority to act on behalf of the principal and that
belief is traceable to the principal‘s manifestations.‖12 We recently
reiterated this longstanding rule:
[W]here a principal has, by his voluntary act, placed
an agent in such a situation that a person of
ordinary prudence, conversant with business usages
and the nature of the particular business, is justified
in presuming that such agent has authority to
perform, on behalf of his principal, a particular act,
such particular act having been performed, the
principal is estopped as against such innocent third
9 Plaintiffs Mr. and Mrs. Manus, Mr. Henrie, and
Ms. Swinburne did not appeal this ruling.
10 In a wide variety of areas, the federal courts have imposed
liability on principals for the misdeeds of agents acting with
apparent authority. See, e.g., Am. Soc’y of Mech. Eng’rs, Inc. v.
Hydrolevel Corp., 456 U.S. 556, 565–66 (1982).
11 RESTATEMENT (SECOND) OF AGENCY § 124A cmt. a (1958).
(―Authority and apparent authority . . . may exist concurrently or
there may be one and not the other.‖).
12 RESTATEMENT (THIRD) OF AGENCY § 2.03 (2006).
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person, from denying the agent‘s authority to
perform it.13
¶ 22 ―The doctrine of apparent authority has its roots in
equitable estoppel. [I]t is founded on the idea that where one of
two persons must suffer from the wrong of a third[,] the loss
should fall on that one whose conduct created the circumstances
which made the loss possible.‖14 The authority of an agent is not
―‗apparent‘ merely because it looks so to the person with whom
he deals,‖ but rather ―[i]t is the principal who must cause third
parties to believe that the agent is clothed with apparent
authority.‖15 A ―belief that results solely from the statements or
other conduct of the agent, unsupported by any manifestations
traceable to the principal, does not create apparent authority,‖
and ―[a]n agent‘s success in misleading the third party as to the
existence of actual authority does not in itself make the principal
accountable.‖16
¶ 23 We articulated the three-part test for apparent authority
in Luddington v. Bodenvest, Ltd.:
(1) that the principal has manifested his [or her]
consent to the exercise of such authority or has
knowingly permitted the agent to assume the
exercise of such authority;
(2) that the third person knew of the facts and,
acting in good faith, had reason to believe, and did
actually believe, that the agent possessed such
authority; and
(3) that the third person, relying on such
appearance of authority, has changed his [or her]
13 Grazer v. Jones, 2012 UT 58, ¶ 11, 289 P.3d 437 (alteration in
original).
14 Luddington v. Bodenvest Ltd., 855 P.2d 204, 209 (Utah 1993)
(first alteration in original) (citation omitted) (internal quotation
marks omitted).
15City Elec. v. Dean Evans Chrysler-Plymouth, 672 P.2d 89, 90
(Utah 1983) (emphasis added).
16 RESTATEMENT (THIRD) OF AGENCY § 2.03 cmt. c (2006).
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position and will be injured or suffer loss if the act
done or transaction executed by the agent does not
bind the principal.17
¶ 24 The district court concluded that Ms. Hunter and
Mr. Jordan failed to demonstrate issues of material fact as to all
three elements; that Mr. Burdick and Ms. Temples failed to
establish element three—reliance upon the manifestation of
authority; and that the Marquezes failed to demonstrate elements
one and two—manifestation of authority by HTK or that they
believed or had reason to believe that Mr. Campbell possessed
such authority.
¶ 25 For clarity, we structure our analysis according to the
category of plaintiffs. We agree with the district court that the
Category One Plaintiffs who appealed—Mr. Burdick and
Ms. Temples—failed to demonstrate issues of material fact as to
the element of reliance. We also agree that the Category Two
Plaintiffs—Ms. Hunter, Mr. Jordan, and the Marquezes—failed to
demonstrate issues of material fact as to a manifestation of
authority by HTK. Accordingly, we affirm the grant of summary
judgment for HTK on the issues of apparent authority.18
A. Category One Plaintiffs Mr. Burdick and Ms. Temples
Fail to Demonstrate Reliance
¶ 26 The district court concluded that Mr. Burdick‘s and
Ms. Temples‘s evidence failed to demonstrate a genuine issue of
material fact with respect to the third element of the apparent
authority test: whether they relied on the appearance of
authority, changed their position, and would be injured or suffer
loss if the act done by Mr. Campbell does not bind HTK.
¶ 27 We first note that the issue of reliance as an element of
apparent authority seems to be a matter of some confusion and
17855 P.2d at 209 (alterations in original) (quoting 3 AM. JUR.
2D Agency § 80 (1986)).
18Because each plaintiff failed to establish at least one required
element for apparent authority, we do not decide whether they
may have met the other elements.
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disagreement among courts and scholars.19 For example, the
Restatement (Third) of Agency takes the position that apparent
authority is a separate doctrine from equitable estoppel—the
latter requiring a showing of reliance while the former does not.20
In contrast, American Jurisprudence uses the terms ―apparent
authority‖ and ―equitable estoppel‖ interchangeably, and requires
reliance as an element of both.21 Plaintiffs appear to argue for a
position akin to the Restatement, contending that the district court
19 Compare Jones v. HealthSouth Treasure Valley Hosp., 206 P.3d
473, 480–81 (Idaho 2009) (―[A] plaintiff is only required to prove
reasonable belief, rather than justifiable reliance, to satisfy a claim
of apparent authority.‖), with Christian Methodist Episcopal Church
v. S & S Constr. Co., 615 So. 2d 568, 573 (Miss. 1993) (requiring
a ―detrimental change in position as a result of reliance‖), and
Billops v. Magness Constr. Co., 391 A.2d 196, 198 (Del. 1978) (―[A]
litigant must show reliance on the indicia of authority originated
by the principal‖). See generally Dane Getz, Comment, The
Doctrine of Apparent Authority in Illinois Medical Malpractice Cases:
An Argument for Its Application, 18 S. ILL. U. L.J. 195 (1993)
(discussing confusion and inconsistency surrounding reliance and
the doctrine of apparent authority).
20 RESTATEMENT (THIRD) OF AGENCY § 2.03 cmt. e (2006) (―To
establish that an agent acted with apparent authority, it is not
necessary for the plaintiff to establish that the principal‘s
manifestation induced the plaintiff to make a detrimental change
in position, in contrast to the showing required by the estoppel
doctrines . . . .‖).
21 3 AM. JUR. 2D Agency § 81 (1986) (―Although the general
statements of the doctrine of apparent authority do not include all
the elements of . . . equitable estoppel, . . . there is no practical
difference in effect between them . . . .‖ (footnotes omitted)); see
also Baptist Mem’l Hosp. Sys. v. Sampson, 969 S.W.2d 945, 947 n.2
(Tex. 1998) (“Many courts use the terms ostensible agency,
apparent agency, apparent authority, and agency by estoppel
interchangeably.‖); Great Am. Ins. Co. v. Gen. Builders, Inc., 934
P.2d 257, 261 (Nev. 1997) (―Apparent authority is, in essence, an
application of equitable estoppel, of which reasonable reliance is a
necessary element.‖).
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erroneously required that ―reliance must be on a specific
principal.‖22 However, Utah has taken the position that a plaintiff
must establish that he relied on the manifestation of authority—
that is, that he changed his position as a result of the appearance
of authority.23 This is because ―authority by holding out is of no
importance until a third party relies thereon.‖24 We find no
reason to depart from that position.
¶ 28 With this in mind, we turn to whether there is sufficient
information in the record to demonstrate a genuine issue of
material fact on whether Mr. Burdick and Ms. Temples reasonably
relied on legally sufficient manifestations of Mr. Campbell‘s
authority to act for HTK, viewing all evidence in favor of the
plaintiffs, the nonmoving parties on summary judgment.
¶ 29 Mr. Burdick first met with Mr. Campbell in 2001,
shortly after Mr. Burdick‘s retirement. In his deposition
testimony, Mr. Burdick stated that Mr. Campbell represented that
he was affiliated with HTK, and this representation was made
when Mr. Burdick chose to roll his union pension into an annuity.
Mr. Burdick also testified that he understood Mr. Campbell to be a
licensed professional and, based on documents he signed when
rolling over his pension, Mr. Burdick knew that HTK was
involved in licensing Mr. Campbell. After making the investment
in the annuity, Mr. Burdick continued to meet with Mr. Campbell
every six to eight weeks for two years. When Mr. Campbell
offered Mr. Burdick the BHDC notes, Mr. Burdick was under the
impression that this was ―just another investment‖ option offered.
After the sale of BHDC notes, Mr. Burdick continued to meet
about his investments with Mr. Campbell. At no point during
these meetings was Mr. Burdick notified that Mr. Campbell was
no longer working with HTK or that Mr. Burdick‘s HTK
investment products had been reassigned to a different agent.
Mr. Burdick also testified that he assumed that during his
22Plaintiffs contend that they nonetheless satisfied the reliance
element under ―either theory.‖
23 Luddington, 855 P.2d at 209.
24 Schlick v. Berg, 286 N.W. 356, 358 (Minn. 1939).
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continued meetings ―things were the same as they were‖ when he
first made investments with Mr. Campbell.
¶ 30 Ms. Temples first met with Mr. Campbell when
Mr. Wheeler introduced them in fall 2001. Ms. Temples was
looking to ―check out doing something with some money [she]
had inherited.‖ Ms. Temples testified she first became aware of
HTK at that time and understood it was a broker. Ms. Temples
also testified that she believed Mr. Campbell worked for HTK,
and that HTK owned FSFG. After meeting with Mr. Campbell,
Ms. Temples agreed to place the inheritance in an annuity.
Ms. Temples continued to meet with Mr. Campbell. Ms. Temples
testified that she understood Mr. Campbell was acting on behalf
of HTK when he sold her the BHDC notes, and furthermore, that
if there was a change in Mr. Campbell‘s affiliation, ―[h]e had
never told me he did anything different, so I assumed it was
[HTK].‖ Furthermore, Ms. Temples asked Mr. Wheeler—an HTK
agent who was in the same office as Mr. Campbell—his opinion
about BHDC. In his office, Mr. Wheeler responded to
Ms. Temples that he thought it was a ―good thing,‖ that
―customers were loving it,‖ and that if he ―had any extra money
he would invest in it too.‖
¶ 31 Neither Mr. Burdick nor Ms. Temples received
notification from Mr. Campbell or HTK that Mr. Campbell was no
longer an authorized agent of HTK. The Registered
Representative‘s Contract between Mr. Campbell and HTK
required a representative to ―immediately remove any signs and
terminated [sic] all advertisements, including telephone numbers
if possible, which may indicate an association with HTK‖ and
―immediately notify all clients in writing that Representative is no
longer associated with HTAK [sic], sending a copy of such notice
to HTK.‖ Mr. Burdick and Ms. Temples both testified that they
received no notice, either from Mr. Campbell or HTK.
Mr. Campbell testified that not only did he fail to send a letter
notifying clients of his affiliation change, but he continued to
monitor his HTK clients‘ accounts. Jay Baker, a senior compliance
analyst with HTK at the time, testified that HTK was aware of
Mr. Campbell‘s resignation, Mr. Campbell‘s clients were not
transferred to another broker-dealer, and Mr. Campbell‘s clients
who purchased HTK products from him were still customers of
HTK. Mr. Baker also testified that ―[i]t would not be [HTK‘s]
normal practice to . . . write out to their client base‖ to inform
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them of any affiliation change. Furthermore, the remaining HTK
agents sharing the office with Mr. Campbell continued using the
same office space (with no change in the configuration), phone
and fax numbers, and office signage as Mr. Campbell.
Mr. Campbell and the HTK agents also shared a computer system
and access to all customer files. Finally, when Mr. Burdick
received a statement regarding the BHDC notes reflecting an
address change, he phoned Mr. Campbell and was told there
―wasn‘t a problem, it was just some kind of legal issue and they
had to do it.‖
¶ 32 The district court found that Mr. Burdick testified that
―he understood [Mr.] Campbell was somehow affiliated with
HTK . . . and he assumed HTK was somehow involved in the sale
of BHDC because HTK had been involved with Mr. Campbell two
years prior to investing in BHDC.‖ However, the court concluded
that ―[a]t no time did Mr. Burdick state that he invested in BHDC
because of HTK‖ and ―presented no evidence that he invested in
BHDC because of HTK‘s involvement or because he made the
assumption about HTK‘s involvement.‖ As to Ms. Temples, the
district court found ―[a]t no time did Mrs. Temples testify that she
invested in BHDC because of HTK‘s alleged involvement. There
is no evidence that she would not have invested anyway and
HTK, therefore, cannot be considered a cause of her investment.‖
We agree with the district court‘s conclusions. That Mr. Burdick
or Ms. Temples believed in a continued relationship between
Mr. Campbell and HTK and were not informed of his termination
may go to the reasonableness of reliance on his apparent authority,
but it does not establish reliance in the first instance. We find
nothing in the record demonstrating that either Mr. Burdick or
Ms. Temples changed his or her position—that is, that they
invested in the BHDC notes—because they believed HTK was the
principal behind those investments. Absent this showing, HTK
cannot be held liable for the acts of an unauthorized agent.
¶ 33 Plaintiffs also argue that they did provide sufficient
evidence regarding reliance because on November 10, 2010—
nearly seventeen months after the district court‘s grant of
summary judgment—plaintiffs filed a motion for reconsideration
along with declarations asserting that they believed Mr. Campbell
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Opinion of the Court
represented HTK when he sold the BHDC notes and that they
relied on HTK when they purchased the notes.25 They claim that
the district court erred when it refused to consider plaintiffs‘
declarations as untimely. We disagree.
¶ 34 We first reiterate that ―postjudgment motions to
reconsider are not recognized anywhere in either the Utah Rules
of Appellate Procedure or the Utah Rules of Civil Procedure.‖26
Therefore, ―trial courts are under no obligation to consider
motions for reconsideration‖ and ―any decision to address or not
to address the merits of such a motion is highly discretionary.‖27
We conclude that the district court did not abuse its discretion
when it declined to consider the additional evidence. Plaintiffs
claim that the district court should have considered their new
evidence because the court had ―applied a different rule of law‖
and ―the parties had not had an opportunity to develop the record
with an eye toward the newly articulated rule.‖ This argument is
in error because, as discussed above, the element of reliance has
long-been required in Utah. Thus, in its ruling, the district court
did not articulate a new rule of law. Moreover, plaintiffs did not
allege any reason why they could not present this evidence
earlier. Instead, it appears that they simply neglected to provide
25 In his declaration, Mr. Burdick stated, ―I relied on HTK, its
investment advice, and its recommendation, when I invested in
BHDC.‖ Similarly, Ms. Temples declared, ―I relied on HTK‘s
approval of BHDC in deciding to invest in BHDC. . . . I would not
have invested in BHDC had I known Mr. Cambpell no longer
worked for HTK.‖
26 Gillett v. Price, 2006 UT 24, ¶ 6, 135 P.3d 861; id. ¶ 8
(―Hereafter, when a party seeks relief from a judgment, it must
turn to the rules to determine whether relief exists, and if so,
direct the court to the specific relief available. Parties can no
longer leave this task to the court by filing so-called motions to
reconsider and relying upon district courts to construe the
motions within the rules.‖); accord Ron Shepherd Ins., Inc. v. Shields,
882 P.2d 650, 653 n.4 (Utah 1994) (―[T]his court has consistently
held that our rules of civil procedure do not provide for a motion
for reconsideration of a trial court‘s order or judgment . . . .‖).
27 Tschaggeny v. Milbank Ins. Co., 2007 UT 37, ¶ 15, 163 P.3d 615.
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the declarations of reliance during the summary judgment
proceeding. We find no basis to conclude that the court abused its
broad discretion when it refused to hear evidence presented, for
the first time, nearly seventeen months after summary judgment
was granted. We therefore affirm the district court‘s grant of
summary judgment in favor of HTK for Mr. Burdick‘s and
Ms. Temples‘s claims based on apparent authority.
B. Category Two Plaintiffs Ms. Hunter, Mr. Jordan,
and the Marquezes Fail to Show a Manifestation
of Authority by HTK
¶ 35 The district court ruled that all three elements of
apparent authority were at issue with the Category Two
Plaintiffs—those plaintiffs who first invested with Mr. Campbell
when he was no longer a licensed representative of HTK. As to
the first element of the Luddington test, we reiterate that ―the
principal . . . must cause third parties to believe that the agent is
clothed with apparent authority,‖ and that the authority of an
agent is not ―‗apparent‘ merely because it looks so to the person
with whom he deals.‖28
¶ 36 In evaluation of whether HTK clothed Mr. Campbell
with the appearance of authority, we find two cases dealing with
the investment context to be instructive. In Harrison v. Dean Witter
Reynolds, Inc., the Seventh Circuit, construing Illinois agency law,
found that a brokerage firm did not manifest to investors the
appearance of authority in its employees when the investors
transferred money directly to the employees‘ personal account for
investment rather than opening an account with the brokerage
firm.29 When the employees invested in high-risk put-options
rather than the promised low-risk municipal bonds, the court held
that the brokerage firm was not liable for the employees‘ actions.30
Similarly, in Kohn v. Optik, Inc., a federal district court found no
apparent authority where the plaintiff ―did not open a regular
28City Elec. v. Dean Evans Chrysler-Plymouth, 672 P.2d 89, 90
(Utah 1983).
29 974 F.2d 873, 883–84 (7th Cir. 1992).
30 Id.
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Opinion of the Court
account with [the principal], . . . did not send her checks to the
brokerage, and . . . never received a single receipt, statement, or
other communication bearing [the principal]‘s name.‖31 With
these cases in mind, we turn now to the individual arguments of
the Category Two Plaintiffs.
1. Ella Dean Hunter
¶ 37 Ms. Hunter argues that she always believed there was a
financial company backing her investment. Ms. Hunter seeks to
hold HTK liable, under the theory of apparent authority, based
primarily on a business card that was given to her by
Mr. Campbell. The district court found that there was ―no
evidence that [Ms.] Hunter relied on any actions or manifestations
of HTK regarding Mr. Campbell‘s alleged authority to sell
investments in BHDC.‖ The district court further found that there
was ―no evidence‖ that Ms. Hunter ―relied on the manifestations
of HTK in making her decision to invest in BHDC.‖
¶ 38 Ms. Hunter never purchased any investment products
from Mr. Campbell while he was a registered representative of
HTK. Instead, Ms. Hunter had a previous investment through
Pacific Life that she purchased from Mr. Campbell while he was
associated with a previous broker-dealer. Her next investment
with Mr. Campbell came after his termination from HTK, in April
2003, when she purchased BHDC notes. In order for there to be a
manifestation of authority, ―the principal . . . must cause third
parties to believe that the agent is clothed with apparent
authority.‖32 The business card, alone, is not sufficient to
constitute a manifestation of authority.33 Without a manifestation
31No. CV 92-12881 LGB (BX), 1993 WL 169191, at *7 (C.D. Cal.
Mar. 30, 1993).
32 City Elec., 672 P.2d at 90.
33 See Long v. Aronov Realty Mgmt., Inc., 645 F. Supp. 2d 1008,
1034 n.57 (M.D. Ala. 2009) (―[I]t is also common knowledge that
business cards are easy to acquire or improperly used, and that a
third party‘s reliance on the agent‘s authority to act should be
based on something other than just a business card.‖);
CSX Transp., Inc. v. Recovery Express, Inc., 415 F. Supp. 2d 6, 11
(D. Mass. 2006) (explaining that the court ―could find no cases
where . . . giving someone a business card with the company
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of authority traceable to HTK, there can be no apparent authority
as applied to Ms. Hunter. We therefore uphold the district court‘s
grant of summary judgment in favor of HTK on Ms. Hunter‘s
claims based on apparent authority.
2. Terry Jordan
¶ 39 Mr. Jordan did not meet with Mr. Campbell until after
Mr. Campbell had terminated his relationship with HTK.
Mr. Jordan argues that Mr. Campbell had given him a business
card identifying HTK, that HTK was aware of Mr. Jordan‘s
relationship with FSFG, and that knowledge amounted to a
manifestation of authority. As with Ms. Turner, we find that the
business card alone is not sufficient. For example, Mr. Jordan
―did not open a regular account with [the principal], [he] did not
send [his] checks to the brokerage, and [he] never received a
single receipt, statement, or other communication bearing [the
principal]‘s name.‖34 Thus, Mr. Jordan has not presented
sufficient evidence to generate a genuine issue of material fact
regarding HTK‘s manifestation of authority. Therefore, we affirm
the district court‘s grant of summary judgment for HTK.
3. Michael and Teri Marquez
¶ 40 The Marquezes met with Mr. Campbell for the first time
after his termination from HTK. The crux of their argument on
appeal is that they met with Mr. Wheeler, as a registered HTK
representative, and Mr. Wheeler referred them across the hall to
Mr. Campbell. They contend that Mr. Wheeler‘s actions are
sufficient to meet the element that ―the principal has manifested
his [or her] consent to the exercise of such authority or has
knowingly permitted the agent to assume the exercise of such
authority.‖35 We disagree. A mere referral does not amount to a
manifestation of authority to act in the name of a principal
empowered to do so by apparent authority. In fact, a referral may
very well imply the opposite in the context of authority—that the
name or logo, access to a company car, or company stationery, by
themselves, created sufficient indicia of apparent authority‖).
34 Kohn, 1993 WL 169191, at *7.
35 Luddington, 855 P.2d at 209 (alteration in original).
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Opinion of the Court
scope of Mr. Wheeler‘s authority was less than or different from
Mr. Campbell‘s such that a referral was required. Therefore, we
affirm the district court‘s grant of summary judgment as to the
Marquezes‘ claims based on apparent authority.
II. THE DISTRICT COURT DID NOT ABUSE ITS
DISCRETION WHEN IT DECLINED TO ADDRESS
PLAINTIFFS‘ NEGLIGENCE AND CONTROL-
PERSON LIABILITY CLAIMS ON MOTION
FOR RECONSIDERATION
¶ 41 Plaintiffs next contend that the district court erred when
it granted summary judgment for their claims of negligence and
control-person liability. We disagree and affirm the district court
ruling.
¶ 42 In their motion for reconsideration on November 10,
2010, plaintiffs proffered new evidence of control liability and
asserted a general negligence claim for the first time.36 As we
explained above, ―postjudgment motions to reconsider are not
recognized anywhere‖ in our rules of procedure;37 therefore,
―trial courts are under no obligation to consider motions for
reconsideration‖ and ―any decision to address or not to address
the merits of such a motion is highly discretionary.‖38 We now
evaluate whether the district court abused its broad discretion in
declining to address the new claims on a motion to reconsider.
A. Negligence Claim
¶ 43 In plaintiffs‘ Third Amended Complaint, they alleged a
count of ―Negligent Training and Supervision‖ on the part of
HTK. They argued that HTK placed Mr. Campbell ―in a position
of trust and reliance,‖ that HTK ―did not adequately train‖
Mr. Campbell, and that HTK ―did not adequately supervise‖
Mr. Campbell. In their motion for summary judgment, plaintiffs
36 Plaintiffs contend that they raised their negligence issue
prior to the motion for reconsideration. For the reasons explained
below, we disagree.
37 Gillett v. Price, 2006 UT 24, ¶ 6, 135 P.3d 861.
38 Tschaggeny v. Milbank Ins. Co., 2007 UT 37, ¶ 15, 163 P.3d 615;
see supra ¶ 34.
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asserted that ―HTK had an affirmative duty to supervise its Five
Star office and customers.‖ At oral argument, the district court
asked plaintiffs‘ counsel, ―When you say negligent claim, we‘re
talking about negligent supervision?‖ Counsel‘s response was
unequivocal: ―Yes, your honor.‖ Counsel then stated that
plaintiffs‘ allegation was that HTK was ―primarily liable on the
negligence claim‖ because ―[t]hey still have to supervise their
own customers.‖ However, counsel went on to explain that
HTK‘s duty related to the agency relationship with Mr. Campbell,
arguing that if HTK failed to inform the customers of
Mr. Campbell‘s termination, ―the agency continues.‖ Thereafter
ensued a lengthy discussion about agency law and whether
Mr. Campbell had apparent authority. Ultimately, the district
court understood and ruled on this argument as rooted in a ―duty
to supervise Mr. Campbell aris[ing] from Mr. Campbell selling
BHDC as either a registered representative of HTK or as its
alleged agent.‖
¶ 44 In their motion for reconsideration, plaintiffs restyled
their argument as a broad negligence count, independent of any
claim of deficient supervision or training of Mr. Campbell. At the
hearing for the motion for reconsideration, the district court
recognized that plaintiffs now suggested ―that I should view this
[claim] in light of a general negligence claim rather than the
specific claims‖ that were pleaded during summary judgment.
The court concluded, however, ―I‘m not inclined to do that,
because I‘m going to hold the parties to their pleadings.‖
¶ 45 On appeal, plaintiffs again assert their general
negligence claim and allege that this was their argument all along,
stating that they ―tried in vain to explain‖ to the district court that
their claim was based on ―the duties HTK owed them directly as
customers, regardless of [Mr.] Campbell.‖ We are not persuaded.
We have repeatedly explained that a party must ―afford[] the
district court a meaningful opportunity to rule on the ground that
is advanced on appeal.‖39 This means that, even if argued
indirectly, the claim ―must at least be raised to a level of
39 Hill v. Superior Prop. Mgmt. Servs., Inc., 2013 UT 60, ¶ 46, 321
P.3d 1054.
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Opinion of the Court
consciousness such that the trial judge can consider it.‖40 Based
on the record, we cannot say that the court was given a
meaningful opportunity to consider plaintiffs‘ claim that HTK
owed a duty to its clients separate from its duty to supervise
Mr. Campbell.
¶ 46 Consequently, plaintiffs did not bring this claim to the
consciousness of the court until their motion for reconsideration.
The claim was not asserted until well over a year after the order
for summary judgment was entered, it was not based on any
previously unavailable evidence, and plaintiffs do not assert any
excuse or exceptional circumstances for not bringing the claim
earlier. We therefore conclude that the district court did not abuse
its broad discretion in declining to address the claim brought for
the first time on a motion for reconsideration. We therefore affirm
the district court ruling.
B. Control Liability Claim
¶ 47 The Manuses and the Marquezes argue that the district
court erred when it struck evidence, offered for the first time on
reconsideration, to support their theory of control-person liability.
As part of their motion to reconsider, plaintiffs attached exhibits
that consisted of additional Declarations of the Plaintiffs, a Central
Registration Depository database summary listing Mr. Campbell‘s
securities registration (CRD listing), a notice from NASD to
members, and FINRA arbitration resolutions. This evidence was
an attempt to show that HTK ―controlled‖ both Mr. Wheeler (as
HTK‘s agent to the Marquezes) and Mr. Campbell (as HTK‘s
agent to the Manuses). HTK filed a motion to strike, which the
district court granted in full. Plaintiffs appeal the district court‘s
rejection of their control-personal liability claim.
¶ 48 As with their general negligence claim, plaintiffs did
not present this issue in their Third Amended Complaint or at
summary judgment. Instead, plaintiffs raised control liability as a
theory of recovery for the first time in their motion for
reconsideration. The district court struck the evidence proffered
on reconsideration by plaintiffs as untimely because the evidence
was available prior to HTK‘s motion for summary judgment.
40 R.C.S. v. A.O.L. (In re Baby Girl T.), 2012 UT 78, ¶ 34, 298 P.3d
1251 (internal quotation marks omitted).
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The evidence in question and the new control liability theory were
presented three years after fact discovery and seventeen months
after summary judgment was granted. Therefore, as with the
negligence claim, we hold that the district court did not abuse its
discretion when it declined to consider the newly presented
evidence and claim. We thus affirm the district court‘s ruling on
the control liability claim.
III. THE DISTRICT COURT DID NOT ERR WHEN
IT GRANTED SUMMARY JUDGMENT ON
PLAINTIFFS‘ MATERIAL AID CLAIM
¶ 49 Plaintiffs also contend that HTK is jointly and severally
liable for materially aiding Mr. Campbell in the sale of the BHDC
notes under Utah Code section 61-1-22(4)(a). They argue that the
district court erred when it denied their material aid claim.
¶ 50 We first address HTK‘s contention that this argument is
not preserved. Plaintiffs first raised this argument in their motion
for reconsideration. Nonetheless, it appears the district court
considered this argument on its merits.41 We note again that ―trial
courts are under no obligation to consider motions for
reconsideration.‖42 That being said, if a trial court decides, in its
discretion, to address the merits of a claim raised for the first time
in a motion to reconsider, that claim is preserved.43 Thus, though
plaintiffs raised the material aid claim for the first time in the
motion to reconsider, the district court, both at oral argument and
41 This appears to be the case because plaintiffs apparently did
not submit new evidence at the reconsideration stage but instead
relied on previously admitted evidence to bring their material aid
theory. In contrast, the district court did not address the control
liability claim on its merits because the court struck the evidence
supporting that theory as untimely.
42 Tschaggeny v. Milbank Ins. Co., 2007 UT 37, ¶ 15, 163 P.3d 615.
43 See Brookside Mobile Home Park, Ltd. v. Peebles, 2002 UT 48,
¶ 14, 48 P.3d 968 (―[O]nce trial counsel has raised an issue before
the trial court, and the trial court has considered the issue, the
issue is preserved for appeal.‖).
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Opinion of the Court
in its order on the motion, expressly stated that it was considering
the claim. We therefore determine that the issue was preserved.
¶ 51 We nonetheless affirm the district court‘s grant of
summary judgment for HTK on the material aid claim. Plaintiffs
claim that ―HTK materially aided Five Star and Campbell‘s sales
of BHDC . . . by failing to destroy Campbell and Five Star‘s
apparent authority.‖ Because we hold that all plaintiffs failed to
establish apparent authority between HTK and Mr. Campbell,44
this claim necessarily fails.45
IV. THE DISTRICT COURT DID NOT ERR WHEN IT
CONCLUDED THAT THE RELEASE SIGNED
BY MR. HOWELL RELEASED HTK FROM
LIABILITY FOR CLAIMS RELATED
TO THE SALE OF BHDC NOTES
¶ 52 Plaintiff Grant Howell appeals the district court‘s grant
of summary judgment in favor of HTK on the grounds that an
agreement signed between him and Penn Mutual released his
claims against HTK for liability related to the sale of BHDC
promissory notes.46
¶ 53 In October 2002, while Mr. Campbell was a registered
agent of HTK, Mr. Campbell sold Mr. Howell a whole-life
insurance policy through Penn Mutual (Policy Number 8129818).
44 Supra Part I.
45 Plaintiffs also contend that HTK ―directly participated‖ in
the BHDC sales because Mr. Wheeler told them about the
investment and introduced them to Mr. Campbell. However, the
court granted summary judgment for Mr. Wheeler on all claims
against him; thus, his conduct cannot be the basis of HTK‘s
liability. See Holmstead v. Abbott G. M. Diesel, Inc., 493 P.2d 625,
627 (Utah 1972) (―[A]bsent any delict of the master other than
through the servant, the exoneration of the servant removes the
foundation upon which to impute negligence to the master.‖),
superseded by statute on other grounds as recognized in Krukiewicz v.
Draper, 725 P.2d 1349 (Utah 1986); RESTATEMENT (THIRD) OF
AGENCY § 7.03 cmt. b (2006) (―[A] principal‘s vicarious liability
turns on whether the agent is liable.‖).
46 HTK is a wholly-owned subsidiary of Penn Mutual.
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In November 2002, Mr. Howell purchased BHDC notes through
Mr. Campbell, investing over $100,000. On June 25, 2004,
Mr. Howell sent a letter to Penn Mutual expressing dissatisfaction
with Mr. Campbell and the policy sold to him by Mr. Campbell.
Mr. Howell‘s letter also complained of the BHDC notes, referring
to them as ―a private placement investment that was supposed to
be paying 12% interest.‖ He noted that he later learned that the
investment was ―an unregistered security‖ and that both the
investment and Mr. Campbell were being investigated.
Mr. Howell requested a refund of the money he had invested in
his life insurance policy ($30,000) as well as interest on the BHDC
notes ―at the minimum guaranteed rate on that money,‖
threatening to hold Penn Mutual responsible for his
approximately $100,000 investment in BHDC. Mr. Howell sent
two more letters to Penn Mutual, dated September 20, 2004 and
October 14, 2004. In response to Mr. Howell‘s letters, Penn
Mutual sent two letters. The first letter was sent on July 20, 2004,
by Robyn Label, Vice President of Market Conduct at Penn
Mutual. Penn Mutual offered Mr. Howell a settlement equal to
the cash surrender value of his life insurance policy at the time his
policy was terminated, which was $10,639. The letter also
contained a statement by Ms. Label that Penn Mutual was ―not in
a position to respond regarding the activities involving the private
placement investment, as it was not sold through Penn Mutual.‖
The second response letter was sent on October 28, 2004, by Lisa
Gottlieb, Market Conduct and Compliance Specialist with Penn
Mutual. Through this letter, Penn Mutual again offered
Mr. Howell a settlement for $10,639, the cash surrender value of
his life insurance policy. This letter reiterated the statement of
Ms. Label in the first response letter, that Penn Mutual‘s ―position
remains the same regarding the activities involving the private
placement investment, as it was not sold through Penn Mutual.‖
¶ 54 In February 2005, the parties executed the release
agreement that is the subject of this appeal. Based on the Release,
HTK moved for summary judgment against Mr. Howell for his
claims relating to the BHDC notes. The district court granted
summary judgment, concluding that the Release ―is clear and
unambiguous‖ and that ―Mr. Howell released HTK and waived
any claims against HTK.‖ Mr. Howell now appeals that
determination.
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Opinion of the Court
¶ 55 The parties agree that, under the terms of the Release,
Pennsylvania law governs this issue. Under Pennsylvania law,
the ―fundamental rule in contract interpretation is to ascertain the
intent of the contracting parties.‖47 And when interpreting a
written contract, ―the intent of the parties is the writing itself.‖48
Moreover, ―[i]t is axiomatic that releases are construed in
accordance with traditional principles of contract law.‖49 Thus,
―[t]he effect of a release is to be determined by the ordinary
meaning of its language.‖50 Finally, ―all provisions in the
agreement will be construed together and each will be given
effect.‖51
¶ 56 We thus begin by looking to the language of the
Release. Mr. Howell argues that the Release is at least ambiguous
because, though it contains broad release language, it also
contains ―limiting language‖ that restricts the release to the life
insurance policy referenced. The opening paragraph reads:
The parties to the Agreement desire to settle and
compromise all disputes and claims between them
arising from the sale of Penn Mutual Policy Number
8129818 (―the policy‖) by Jeffrey Campbell to
Mr. Grant Howell. Policy Number 8129818 was
issued on October 28, 2002 with Mr. Grant Howell as
owner and insured.
However, HTK cites the broad language of paragraph three to
support its position that the intent of the parties to release all
claims is clear and unambiguous. In relevant part, paragraph
three states:
47 Ins. Adjustment Bureau, Inc. v. Allstate Ins. Co., 905 A.2d 462,
468 (Pa. 2006).
48 Id.
49Maloney v. Valley Med. Facilities, Inc., 946 A.2d 702, 706 (Pa.
Super. Ct. 2008) (alteration in original).
50Republic Ins. Co. v. Paul Davis Sys. of Pittsburgh S., Inc., 670
A.2d 614, 615 (Pa. 1995).
51 LJL Transp., Inc. v. Pilot Air Freight Corp., 962 A.2d 639, 647
(Pa. 2009).
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Mr. Howell . . . unconditionally releases and forever
discharges Penn Mutual and its . . . subsidiaries, . . .
employees and agents (not including Mr. Jeffrey
Campbell) from any claims, losses, liabilities,
damages, punitive damages, claims for attorneys‘
fees, causes of action or demands of any nature
whatsoever, known or unknown, suspected or
unsuspected, knowable or unknowable, . . . . which
they ever had, now have or may have, arising from,
or in any way related to his dealings with
Mr. Campbell, including the solicitation, purchase,
issuance, or administration of Penn Mutual Policy
Number 8129818.
HTK argues that ―the Release‘s broad language unquestionably
bars Howell‘s claims,‖ and thus summary judgment was proper.
We agree.
¶ 57 Paragraph one provides the reason for the agreement in
the first place—the ―desire to settle‖ issues related to the
insurance policy. However, there is no language that limits the
Release from addressing other concerns between the parties. In
fact, the broad language of paragraph three does just the opposite.
In that paragraph, Mr. Howell agreed to discharge Penn Mutual
(and its subsidiary HTK) ―from any claims . . . of any nature
whatsoever . . . arising from, or in any way related to his dealings
with Mr. Campbell, including the solicitation, purchase, issuance,
or administration of‖ the insurance policy. By ―including‖ the
insurance policy as one of the discharged claims, the Release, on
its own terms, contemplated the possibility of other claims not
referenced. In signing the Release, Mr. Howell agreed to forgo his
rights to claims ―of any nature whatsoever‖ related to his
interactions with Mr. Campbell. We therefore determine that the
plain language of the Release includes claims related to
Mr. Campbell‘s sale of BHDC. Because we determine that the
language is clear and unambiguous, ―there is no need to resort to
extrinsic aids or evidence.‖52 That Mr. Howell may now regret his
52 Lesko v. Frankford Hosp.–Bucks Cnty., 15 A.3d 337, 342 (Pa.
2011).
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Opinion of the Court
decision is not grounds for an alternate interpretation.53
Accordingly, we affirm the district court‘s grant of summary
judgment for HTK.
V. THE DISTRICT COURT ERRED WHEN IT
DENIED ALL OF PLAINTIFFS‘ REQUESTS
FOR ATTORNEY FEES
¶ 58 Finally, plaintiffs argue that the district court erred
when it denied attorney fees in the trial of Mr. Campbell.
Plaintiffs were entitled to pursue attorney fees under Utah Code
section 61-1-22(1)(b), which allows a purchaser of a security to
seek ―reasonable attorney fees‖ if the seller of the security violates
securities laws. Plaintiffs signed a contingency fee agreement
with their legal counsel, and, after they succeeded at the district
court against Mr. Campbell, sought an award of attorney fees
based on this agreement. Plaintiffs‘ counsel submitted an
affidavit of attorney fees that included forty-six dated and
itemized entries of attorney time with detailed descriptions of
work performed. The district court reviewed the affidavit and
request for fees and expressed concern that the affidavit did not
separate out fees based on successful and unsuccessful claims,
which caused the district court concern.54 The district court,
53 See id. at 344 (―[T]he benefit of the bargain is whatever the
parties are willing to exchange.‖).
54 The court noted, ―[O]ne of my concerns as I‘ve gone through
this, there has been a briefing of general attorney‘s fees, and I‘m
going to say general because we have entries literally dealing with
hundreds of hours associated with various items. They‘re not the
typical attorney‘s fee affidavit that the Court is used to seeing
where there‘s a specific amount of time kept on a daily basis
showing exactly how much time is used for various items. And
that causes the Court to have concerns in two respects. First, as I
looked at those entries, it appeared that a very substantial portion
of that work was directed toward the claims against HTK, which
up to this juncture have been disallowed. So why should
Mr. Campbell be required to pay the attorney‘s fee associated
with all of the work against HTK?‖
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Opinion of the Court
relying primarily on Kealamakia, Inc. v. Kealamakia,55 determined
that it was impossible to separate the time spent on the distinct
claims, and therefore impossible to determine whether the
contingent fee request was reasonable.
¶ 59 Plaintiffs argue that the court erred when it attempted
to distinguish between successful and unsuccessful claims
because this was a contingency case, and that distinction is
appropriate only for examination of attorney fees in a case billed
by hourly rates. Plaintiffs also argue that it was an abuse of
discretion to deny attorney fees related to the claim against
Mr. Campbell after HTK had been dismissed on summary
judgment, because at that point Mr. Campbell was the only
remaining defendant and plaintiffs were successful in their claim
against him at trial. We recognize that the ―[c]alculation of
reasonable attorney fees is in the sound discretion of the trial
court, and will not be overturned in the absence of a showing of a
clear abuse of discretion.‖56 We also recognize that the district
court ―may, in its discretion, deny fees altogether for failure to
allocate, . . . [and] may not award wholesale all attorney fees
requested if they have not been allocated as to separate claims
and/or parties.‖57 The method for determining reasonable
attorney fees has been well-established in our case law, and ―as a
practical matter the trial court should find answers to four
questions‖:
1. What legal work was actually performed?
2. How much of the work performed was
reasonably necessary to adequately prosecute
the matter?
55 2009 UT App 148, ¶ 11, 213 P.3d 13 (concluding that a
contingency fee agreement ―is not determinative when calculating
the appropriate amount of an attorney fee award‖).
56 Dixie State Bank v. Bracken, 764 P.2d 985, 988 (Utah 1988)
(citation omitted).
57 Valcarce v. Fitzgerald, 961 P.2d 305, 318 (Utah 1998).
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Opinion of the Court
3. Is the attorney‘s billing rate consistent with the
rates customarily charged in the locality for
similar services?
4. Are there circumstances which require
consideration of additional factors, including
those listed in the Code of Professional
Responsibility? 58
¶ 60 The district court made no findings as to the four
questions above. The district court determined only that it was
impossible to separate the time spent on the separate Campbell
and HTK claims, and therefore impossible to determine
reasonable attorney fees. Thus, the district court denied the
attorney fee request in its entirety. After reviewing the affidavit
submitted by counsel, we hold that the district court abused its
discretion when it denied attorney fees entirely and failed to make
any findings relevant to the four questions above. There was no
dispute as to the hourly rate presented by plaintiffs‘ counsel, and
the affidavit clearly identifies 282 hours attributable only to the
prosecution of the Campbell claim, amounting to $84,600. Despite
the broad authority granted the district court in the determination
of attorney fees, this broad authority is not an invitation to forego
a reasoned analysis or attempt to parse out an appropriate award
of attorney fees.
¶ 61 We therefore reverse the rejection of plaintiff counsel‘s
affidavit and resulting denial of attorney fees and remand for a
determination of appropriate attorney fees. Plaintiffs are entitled
to a reasonable attorney fee for the time spent pursuing the claim
against Mr. Campbell for which they were successful at trial and
which was adequately identified by their affidavit in sections
6(oo)–6(tt). With regards to the remaining time, the district court
must conduct a reasonableness analysis and attempt to discern
what fees may be divided between the Campbell claims and the
HTK claims.
58 Dixie State Bank, 764 P.2d at 990 (footnotes omitted); see also
Softsolutions, Inc. v. Brigham Young Univ., 2000 UT 46, ¶¶ 48–50, 1
P.3d 1095.
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Opinion of the Court
CONCLUSION
¶ 62 We affirm the district court‘s grant of summary
judgment as to all plaintiffs for failing to demonstrate that
genuine issues of material fact exist on the issue of HTK‘s liability
under a theory of apparent authority. We conclude that the
district court did not abuse its discretion when it declined to hear
new evidence and claims on theories of HTK‘s negligence and
control-person liability raised for the first time on a motion to
reconsider. We affirm the district court‘s grant of summary
judgment to HTK on plaintiffs‘ material aid theory. We hold that
the district court did not err when it determined that the Release
between Mr. Howell and HTK released his claims against HTK
regarding the BHDC notes. Finally, we conclude the district court
abused its discretion when it denied all attorney fees. In sum, we
affirm in part and reverse in part, and remand to the district court
for action consistent with this opinion.
33